TPS

KD in CT said: I think you have to be pretty naive to believe people aren't "flat out ripping off the government." Getting rich off Uncle sam A snippet from a very long article:

Can you not read? I did the calculations on the deficit holding spending constant, or as you suggested "normalized at 3%." And i stated "the decline in revenues accounted for 40-60% of the deficits" from 2001-2005; expenditure increases, therefore, are responsible for the remainder. You yourself agreed that tax cuts reduce revenues in the short run. The deficits are a function of increased spending AND decreased revenues--I've always said that. I focus on the revenues because tax cuts affect revenues, not expenditures. I'd hope most people understand that. Your typical response. All you ever do is spew rhetoric, without any facts. Your logic is, "because I say it's so, it's so." Please explain how the dividend decision reduces corporate taxes. Oh, wait, looky here, GG is finally trying to make an argument with data instead of jargon. First, Robert Rubin was one of Clinton's top economic advisors in his first term, before going to Treasury in the second. Through HIS urging Clinton gave up his "Putting People First" program and pursued a deficit reduction plan. You can read about it in Bob Woodward's Agenda, or Robert Riech's Locked in the Cabinet. Nice how you cherry pick your year about the tax hike--the tax hike pushed through in 1993 with impact in 1994, but you choose 1995's growth. Hmmm.... The reason the economy slowed in 1995 is given in your next attempt to use data. Well, let's see, you start with 1994. Now why is Greenspan raising rates in 1994, because of the strong growth in 1994 as a result of lower long term rates in 1993. After the tax increase in 1993 rates came down about another percent--I remember well, because I refinanced my house that September. Obviously we differ on the calendar--you cherry pick your dates. 10-year T-bond: 12/92 6.77% 10/93 5.33% 12/94 7.81% 12/95 5.71% 12/96 6.3% 12/97 5.81% I would hope that you agree markets are "forward looking," yes? That's one of the things Rubin's deficit reduction strategy relied on. Once clinton passed the 1993 tax act, bond markets responded knowing it was contractionary; hence the relatively quick drop in long term rates. Your Greenspan numbers are a reflection of a strong economy in 1994, which was in reaction to the low long rates. Investment expenditures increased by 22.3% in 93Q4, 18.3% in 94Q1, and 25.5% in 94Q2. The strong growth caused long rates to rise again on inflationary expectation. Greenspan's tight monetary policy in 1994 helped slow the economy in 1995. Even my principles students could get that one. By the way, it's interesting that you call 2.5% GDP growth "tanking." It wasn't until Bush's 4th year that GDP exceeded 2.5% from those stimulating tax cuts.

Here's a little example for you.... Uncle

Funny you guys didn't care when it was a republican....

Yes. Try reading YOUR quote directly before "my response" on holding expenditures constant--you actually said assuming expenditures grow by 3% annually. I think maybe you're conflating issues here. There are two decisions by corporations with respect to taxes. First, decisions that affect pre-tax income, like depreciation, amortization, interest expense, etc. Second, there are considerations that impact their investors' taxes after corporate taxes have been paid. The dividend decision affects investor's taxes and has no impact on the profits already taxed at the corporate level. Oh boy! Did I say Rubin was Treasury Secretary? Maybe you should do a little more research.... After the tax increase in 1993 rates came down about another percent--I remember well, because I refinanced my house that September. So the effect that Rubin hoped for from contractionary fiscal policy was a slowdown to bring rates down, which would set the stage for a capital-led recovery--you should appreciate that.

You might want to visit that site on reading comprehension.You clearly don't remember our last go around when I did the numbers holding expenditures constant (see previous post). Also, as stated in the previous post, my point is that government policies don't influence long run growth, but it can influence short run growth. Yes, and you again don't remember that I suggested a cut in the payroll tax as a way to stimulate the economy (see previous post about GDP being cyclical). Thank you for putting words in my mouth as usual. I didn't know profits were a function of "desire to pay out ... dividends"? I always thought they were a function of sales and low costs? Yo MacFly, Clinton raising taxes would be contractionary fiscal policy, cutting deficits, not increasing them. Clinton followed Rubin's recommendation of fiscal discipline so that interest rates would fall, leading to capital-led growth. I won't even respond to the last couple sentences. You can find my posts that contradict the words you're putting in my mouth.

1. The supply side argument is that cutting taxes will lead to higher revenues. I've simply pointed out that each time tax rates are cut, revenues have gone down. That does not rule out the possibility of a "change in behavior" over time. However, the evidence has shown the impact to be insignificant to marginal at best. More taxes are paid when incomes rise (GDP), not when tax rates are cut. Their argument was that tax cuts would lead to higher growth rates--which leads to you next issue. 2. I said the average long run growth rate has been 3% for the past 50 years--of course it's cyclical. If you calculate the real average growth rates of GDP under each president's term, they are all very close to 3%. The implication is that government policies don't seem to have a huge impact on growth--which of course GG accuses me of say government causes growth. 3. In our last go around on this topic I looked at both sides. GG asked me to hold spending constant (or maybe a constant growth) and see what the revenue impact was. The decline in revenues from tax cuts amount to between 40-50% of the deficit as I recall. I focus on the revenue side mostly because that's what their theory focuses on.

This has come full circle. Of course tax cuts are expansionary. Go back 10 years ago and read what I wrote--it's classic Keynesian theory. Tax cuts lead to deficits which are inherently expansionary. Or go back and take a look at some of my examples from last year. IF you cut tax rates, deficits increase because tax revenues fall in the years you cut rates, but after that, revenues of course increase if GDP is growing. Maybe it's too simple. assume gdp grows 3%/year E.g. Year 1 Gdp = 10,000 tax rate =21% --> revenues = 2,100 Year 2 cut taxes to 20% Gdp=10,300 tax revenues = 2,060 deficit grows by 40 from decrease in revenues (much higher from Bush's spending :-) Year 3 Gdp = 10,609 revenues = 2121.8 Roughly 5% tax cut takes two years of 3% gdp growth to gain back revenues. Bigger the tax cut, longer it takes to regain revenues, assuming gdp stays at long term growth rate of 3% (if I assumed the tax rate went down to 19% in year 3 much like Bush's phased in tax cuts, revenues would be 2016, again lower than year 1 and year 2). For every year of the Bush tax cuts, the percentage of individual income taxes as a share of gdp fell. Oh boy, they've finally gone up the last two years. Could that also be related to the stock market rise? Since you brought up Clinton (not me), he raised the top tax rate in 1993 and the share of individual income taxes as a % of gdp increased that same year, and ensuing years (even before the cap gains cut). Bush cuts tax rates and the % share decreases; Clinton raised rates and the share increases. Which one raises revenues, a tax cut or a tax increase? Please explain.

Yes, and I thought you finally agree that tax cuts cause deficits? If you eliminate the social security surplus, the impact of Bush's tax cuts and spending increases are more obvious: 2000 an on-budget surplus of +$86 bil 2001 a deficit of -$32 bil (from 911 and a slowing economy that began in 2000). 2002 a deficit of -$317 bil (First bush tax cut phased in) 2003 a deficit of -$538 bil (another phase of tax cuts) 2004 a deficit of -$568 bil (I believe the last part of the tax cut occured this year?) 2005 a deficit of -$494 bil 2006 a deficit of -$434 bil. That's a total of $2.7 trillion in deficits over his first 6 years. Payroll taxes (SS surplus) have averaged about +$160 bil a year over this period (from +$163 in 2001 to +$185 in 2006), so the overall budget numbers they report, make it look much better. Huh?!? Maybe you should qualify that with non-defense spending side? Yes, great strategy: cut taxes (mainly for your most important constituents) and deficit spend to finance the invasion and attempted rebuilding of Iraq; throw a bone to the not-quite-rich ATM crowd; increase defense spending again and let the ATM phase back in to partially pay for it; then let whoever comes next deal with the mess you've created. Sounds like the same scenario Bush1 faced, only the threat was communism instead of terrorism.

The catcalls to raise taxes usually come after the Republicans' "tax cut, borrow, and spend" policies lead to severe fiscal imbalances. Bush1 was pushed from both sides of the aisle to raise taxes after the Reagan borrowing binge. And now Bush2 is being pushed toward fiscal discipline after his own profligate ways. Of course, from what little I've read about his budget, he's "raising taxes" on the "not rich enough to influence policy" group by letting the ATM slide back to its previous level.

To a certain extent in the short run, redistribution from those with low marginal propensities to consume to those with high MPCs will increase consumption, and therefore GDP (so it's possible to do this if your goal is consumption-led growth, but not recommended). I think the evidence is pretty clear, despite what government has done over the past 50 years, real GDP growth has averaged about 3%. The actions government has taken tend to redistribute from one group to another, with very little impact on the real growth rate.

don't you know that spending is ok as long as it's for military and homeland security? Doesn't matter how much is wasted. On a serious note, and with respect to the tax debate thread, one needs to look at government as a redistribution mechanism. Over the past 6 years the federal tax burden on the wealthy has declined significantly in favor of borrowing, and expenditures have shifted from non-military to military. People seem to ignore the fact that many people (via private business or corporations) become wealthy through government contracts. And, as I've mentioned many a time here, when government auditors can't trace $1 trillion in defense spending, something is seriously wrong... Besides, it's more fun to focus on saying the bottom quintile pays no federal taxes while the top quintile pays 80% of all taxes--duh! When the top 1/5 have 50% of all income (and the bottom gets less than 4%)--of course they pay most of the taxes.

Target Iran This is a good but long piece on the Administration's next ME target. I imagine once all the ducks are in a row, they'll create a spark.

For what it's worth, some detail not found in a drudge link. venezuela

Where would he get such a cockamamie idea? We've never intervened in Latin America before.

Next you're going to tell us that "organic" doesn't mean it's, well...organic, yes? (where's the sarcasm button?) Ps. Welcome back.

I found the first part very funny. All of a sudden he's found the religion of balanced budgets and oil conservation. I laughed out loud when he said that sh-- with a straight face. The rest basically confirmed he may be the worst president in history. I loved the typical political BS: balance the budget; without tax increases; but, at least a half dozen new spending programs...

There is a difference: if we're going to try and police the world's affairs, then we ought take a greater interest in the world's affairs, don't you think?

Yes, I forgot, we do have DC Monkey Jumper.

I certainly didn't expect the standard, "but the other guy's worse" argument here...

A country that begins with U....hmmm...??

Democrats are now the party of fiscal responsibility? cutin' pork

Almost makes ya' miss ICE....

Does that mean he becomes part of "the club" and no longer goes after fraud and abuse? If the SEC would've done its job, Spitzer wouldn't need to do half of what he did. Government regulatory agencies have been hijacked by the industries themselves.

Gotta love the logic... Three day work week